Brynjolfsson: The Armored Wolf in pursuit of alpha

John Brynjolfsson successfully has traded alternative real assets for more than 25 years. And, in 2009 he traded his career at PIMCO, Newport Beach, Calif., for his own firm, Armored Wolf, Orange County, Calif., which trades a global macro strategy emphasizing real assets. The unusual firm name is the translation of Brynjolfsson from the Icelandic Brynjólfur, or Brynjúlfur, or made of brynj-, from brynja “coat of mail, armor” and úlfur (-ólfur) “wolf.”

Brynjolfsson’s experience includes trading commodities, global inflation-linked bonds, event-linked catastrophe bonds, as well as asset allocation and risk management. We talked to him about trading, including the career move from a big traditional asset management firm to his own firm, along with his pursuit of alpha.

Futures Magazine: Your trading career cuts a broad swath across commodities, global inflation-linked and event-linked catastrophe bonds. This trading experience gives you a unique perspective on the markets. You spent 19 years launching and building PIMCO’s Real Return platform from $0 to $80 billion in third-party assets, including launching and managing PIMCO’s second, third and fourth largest public funds before establishing your own firm. Tell us about the evolution of your career as a trader and the various instruments in which you are expert.

John Brynjolfsson: Going back as long I can remember, certainly to my undergraduate and graduate school days, I’ve been driven deep down by answering the question “In what way can I best serve society?” My answer has been to be part of the infrastructure that allocates capital to its best and highest use.

Though my answer, allocating capital to its best and highest use, is somewhat abstract and impersonal, I think this desire to do good is a powerful motivator that has kept me engaged.

[At] the most superficial level, that function (allocating capital as an investment manager) might be most overt in areas like venture capital, stock picking or perhaps high-level asset allocation. [But] my quant training, and opportunities in the job market, convinced me that managing huge portfolios of fixed-income securities, and transforming risk in innovative ways using futures, derivatives, options and structured products, where often a basis point or two was material, was not just significant but the most, certainly in aggregate terms, socially redeeming role for me.

Fleshing this out, I’ve always been attracted to the challenge that the markets provide. There’s a unique combination of big-picture thinking relating to politics, property rights, globalization, sentiment, macro flows and valuation, as well as bottom-up details, ranging from delivery specifications, contract construction and counterparty risk that all come together.

My career got a jump start when I got hired because of my quant background. I hold Math and Physics degrees, and was a MIT Finance PhD candidate, so I had the world of fixed income ahead of me. Ironically, I tried my best to distance myself from those aspects, though I was not entirely successful. My entrepreneurial instincts drove me to listen to clients and think about their needs.